Chapter Exam - Life Premiums and Benefits

T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?

$0

_____ of personal life insurance premiums is usually deductible for federal income tax purposes.

0%

Which premium schedule results in the lowest cost to the policyowner?

Annual

Which of these statements is incorrect regarding the federal income tax treatment of life insurance?

Entire cash surrender value is taxable

If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?

Insured's contingent beneficiary

A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value

Life settlement contract

A policyowner is allowed to pay premiums more than once a year under which provision?

Mode of Premium

P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to

P only

Which of the following best describes a contingent beneficiary?

Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured

Who has the right to change a revocable beneficiary?

Policyowner

K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?

Proceeds will be payable to K's estate if P dies within a specified time

A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?

Proceeds will go to the contingent beneficiary

J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?

Revocable

What is the underlying concept regarding level premiums?

The early years are charged more than what is needed

The Common Disaster Clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?

This clause provides the payment of proceeds to the insured's estate

T is the policyowner for a Life Insurance policy with an Irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the

beneficiary

Quarterly premium payments increase the annual cost of insurance because

interest to the insurer is decreased while the administrative costs are increased

A policyowner's rights are limited under which beneficiary designation?

irrevocable

A level premium indicates

the premium is fixed for the entire duration of the contract

C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?

to cost